Push Comes to Shove: Japan’s E-book Market in 2012

Until now Japan has been the Galapagos Islands of e-books, but as the Tokyo Book Fair opens this Thursday, change is imminent.

By Robin Birtle

In 2011, the only significant e-book revenue in Japan was derived from manga comics. To develop as a mainstream market, a significant push was, and still is, needed from one of the handful of industry players with real clout. One of those players, Rakuten, announced in November 2011 their intention to purchase Kobo. That Kobo will be able to launch a Japanese service on July 19th this year is a truly impressive feat of rapid execution. Pre-orders for the Kobo Touch commenced on Monday with a price set at ¥7,980 ($100), well under the psychologically important ichiman-en (¥10,000) mark.

There is little doubt that Kobo and Rakuten between them will do more in the next 12 months to push the Japanese e-book market into the mainstream than the industry establishment has managed in the last 10 years. But two of the other potential factors from 2011 are also worthy of mention.

Sony blew a big lead in Japan

First, Sony takes the prize for “Squandering a Leading Market Position.” For a couple of years Sony has been the go-to vendor for Japanese consumers interested in a dedicated reader, and its e-book store is perfectly serviceable if not ground-breaking. Sony, though, does little to market their service, has not launched reader apps for mobile devices and has maintained device prices at a level that screams ‘niche’ to potential buyers. ($250 for an entry level Wi-Fi enabled reader? Per-lease). Sony can comfort themselves with their position as technology provider to Pottermore but unless they radically shake up their approach they will be irrelevant in the Japanese e-book market ex-Potter within two years.

Amazon’s a’ comin’ to town

Secondly, of course, Amazon. In Japan, like elsewhere, Amazon is loved as much by consumers as they are disliked by Big Publishing. The latter wishes to extend fixed pricing from printed books to e-books and fears a loss of control should Amazon get their hands on digital publications on wholesale rather than agency terms. Nearly three years have passed since The Japan Times reported that Amazon was aiming to work closely with Japanese publishers for a “win-win situation.” Still no local Kindle store. Jeff Bezos stated in May that Amazon will make an announcement this year in which the Japan Kindle launch date will be revealed. Announcing announcements is very metaphysical even for Japan but observers agreed that Bezos’ comments indicated a late 2012 or early 2013 entry. However, last week things got more concrete when Amazon.co.jp started running teaser ads proclaiming the Kindle is “coming soon.” With relatively little Japanese content digitized, Amazon may have been happy to sit things out for another six months while trans-Pacific management teams fine tuned their Japanese market entry plan. Kobo’s stunning pace appears to have startled the Seattle giant which, for the first time since the Kindle’s US launch, finds itself playing catch up in a major e-book market.

So, with Kobo and Amazon in the frame should we expect the Japanese e-book market and publishing in general to follow the path set by the US? Probably not. Leading publishers in Japan want the entire publishing ‘value chain’ (publisher -> printer -> distributor -> bookstore) to remain intact and will act to preserve the status quo ahead of reinventing the industry. Publishers often don’t digitize high-end hits, even after a windowing period, preferring readers to buy fixed price hardback editions in bookstores. The new Japanese content that is digitized tends to be the cheaper, less prestigious material. A recent notable exception was Walter Issacsson’ Steve Jobs biography which was offered as an e-book at the same time, albeit at the same price, as the hardcover edition (in Japan the biography was published in two parts with a combined price of $50 compared to a street price of about $17 in the US).

SDK and Japan’s Government Support for Digitization

One of the few titles in Japan to get simultaneous hardcover and e-book release

Although digital coverage for new releases is still extremely spotty, there has been a flurry of activity in relation to backlists. A group of influential publishers formed the Shuppan Digital Kikou (SDK) with a broad mandate to promote digital publishing in Japan. Over 300 publishers, have endorsed the SDK and the government has committed nearly $200m of funding to digitize some one million books in part because some SDK activities will be undertaken in the earthquake and tsunami stricken Tohoku region. The SDK has commenced a program of assisting publishers digitize parts of their catalogues. This program has some issues, not least of which are unattractive terms (SDK requires a 20% cut of future revenues) and the fact that the vast majority, if not all, books produced by the SDK will be in a non-open format. The overriding problem though is that this expensive and distracting exercise attempts to solve a non-problem. There certainly are some activities that need industry wide co-ordination to succeed but the actual production of ebooks is not one of them. Publishers incapable of creating their own ebooks can engage the services of one of hundreds of specialist companies in the field.

Recommendations for Change

Instead, a serious attempt to promote digital publishing in Japan would embrace one or more of the following suggestions.

Use EPUB3. This will reduce costs for publishers and give purveyors of reader devices and apps a single, open standard to develop against. Japanese text layout is different (vertical text, right to left page progression, “ruby” phonetic annotations) and out of necessity some local formats emerged in Japan’s first e-book boom some ten years ago. Most successful of these are “dot book,” a binary format from Voyager Japan, and XMDF, an XML-based format from Sharp. There are licensing costs associated with using dot book and neither are open standards. EPUB3 is open and addresses the requirements of Japanese layout, in no small part due to the contribution of Japanese organizations on the EPUB3.0 working group. Voyager Japan had more active members on this working group than either of Google or Adobe and only one fewer than Apple. Let’s thank Voyager Japan, Sharp, Sony, Toppan and many others for their contribution to the Japanese layout facilities in EPUB3 and do as Kobo have done and actually use it.

Drop DRM. The e-book market will follow that for digital music and eventually drop DRM. Whether the motivation is increased sales, fairer treatment of consumers or an attempt to curtail Amazon’s market force, DRM will be dropped. By doing so early the Japanese publishing industry can avoid costly schemes to facilitate vendor interoperability and demonstrate to a still doubting public that they are pro-consumer.

Legitimize jisui (the practice of scanning books so that the physical copy can be dispensed with to free up space). When jisui bureaux sprung up to scan books on behalf of readers a number of leading publishers had a hissy fit, ostensibly on account of possible legal infringements. Instead of proposing an alternative these publishers enrolled 122 authors to sign a letter of indignation. The publishers had (and still have) an opportunity to take control of a portion of the used book market. This is not a new concept. Companies in other industries recognized the benefit of controlling the secondary market in their products many decades ago, most notably in mainframe computing but subsequently in automotive. A publisher sanctioned alternative to jisui would generate revenue, help maintain book prices by reducing the supply of second hand books and free up precious shelf space so that readers can go and buy more books. Furthermore a jisui alternative could include an email opt-in at exactly the time that publishers need to ramp up their engagement with readers. Until now, dragging out negotiations may have been the best way to handle Amazon but with a launch now imminent these same publishers have no choice but to scramble for direct reader relationships and D2C channels if they wish to regain a modicum of leverage with the incoming über-bookseller.

API the industry. Publishers’ strained relationship with Amazon can make it difficult to step back and consider what they can borrow from its playbook. Amazon has enormous flexibility in its business operations due to the way it approaches IT. All of It’s computer systems have been designed to enable integration with other companies’ systems through the use of standard APIs (Application Programming Interfaces). Amazon commenced this approach some ten years ago and now it is second nature within the company. Publishers will go through immense upheaval over the next ten years and the ones most likely to thrive will be collaborating across the industry in ways currently unthought of. A monolithic approach to developing IT systems prevents such innovation. The closest a given company, indeed the whole industry, can get to future proofing their IT investment is by adopting an API driven approach to systems development in the same way that Amazon has. In Japan, Hiroki Kamata of the E-Book 2.0 Forum has already started the ‘Open Publishing Initiative’ which provides a roadmap for the publishing industry to collaborate in precisely this way.

Until now publishing in Japan has been a classic “Galapagos industry” — a commercial ecosystem large enough to survive largely without input or inteference from overseas companies. The industry is changing but it would be a mistake to think that the barbarians at the gate are the real threat to the Japanese publishing industry’s value chain. On the contrary, if Japanese publishers continue to pursue a ‘neither in, neither out’ approach to e-book publishing, they themselves will have forced the hand of product managers at Kobo, Kindle and other foreign entrants. The newcomers will have no choice but to seek out content, establish their own publishing arms and aggressively court the next generation of authors. I would hazard a guess that most of the resulting publications would be digital only.

When push comes to shove Japanese publishers can nurture these new entrants as sales channels or force them to become outright competitors. Which will they choose?

Robin Birtle is the founder of Sakkam Press, a publisher based in Tokyo and London. Robin can be contacted at robin[dot]birtle[at]sakkampress[dot]com.